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“PURCHASE
PROCEDURE”
BY:ASHISH SAWANT
A document by……………………………….ashish sawant
PURCHASE MANAGEMENT
right price,
right quantity,
right quality,
right place and
right time.
Right material:
right material is the one chosen as a result of value analysis,
standardization, variety reduction etc.
Right price:
right price is determined by costing the production process of the
supplier.
Right place: is the one where the item is going to enter the value
stream. If the item is not available here, when needed, it is in short
supply for the process.
A document by……………………………….ashish sawant
Purchase Systems
In an organization all activities are carried out according to systems
and procedures for reducing variations and errors arising out of
individuality. This makes performing the function simple and less
prone to errors. Purchase organization also consists of such systems
established for smooth running of purchasing function. These
systems are pre purchase system, ordering system, post purchase
system.
2. Ordering system
Purchase order is the most important element in ordering system.
Purchase manager releases the purchase order after selecting the
supplier and finalizing the price and other conditions of sale. Once
the purchase order is raised and accepted it becomes a legal
document. Contents of the purchase order are
Forward buying:
when an organization enters into a contract with another company
for buying an item for a period as long as a year or more it is called
forward buying.
Zero stock:
Supplier holds the stock for the buyer. Supplier and customer are
close to each other and the inputs flow in a pipe line or on a
conveyer. Obsolescence is minimized. Suppliers production
schedule is as per customers. Dedicated supplier and customer
Systems contract
Purchase order is used as a single document during the course of
completing entire transaction. Same document is used as delivery
challan at the time of delivery.
The document is updated at every stage of the process. Reduction in
number of documents and documents preparation is major saving in
administration expenses. This results in cost reduction to the value
chain.
A document by……………………………….ashish sawant
Importance of source
Source is the place from where we procure our inputs. These inputs
may be in the form of raw materials, out sourced components or
semi finished items. Manufacturing companies out source large
number of items as they slim down processes.
As outsourcing is gaining importance in business, importance of
source is becoming high.
Following reasons are considered to be making source an important
element in materials management.
Source of market intelligence: source is a window through which the
buyer organization looks at the world outside. Source provides
access to the real time information about the phenomenon.
Information about current trends and industrial climate is obtained
from the sources.[market conditions, industrial climate, what is
new?]
Crucial for product quality: buyer organizations depend on out
sourced components for producing the product which central to the
objectives business. Reliance on capabilities of supplier to meet
tough quality standards is very high in current business
environment.
Member in the value chain: supply source is an important element
in the value chain. Any cost added to the value chain reaches the
end user as price. Hence effectiveness and efficiency of the source
becomes vital to business.
Import substitution, cost reduction, value improvement: as
indigenization of sub assemblies, components and spare parts is
necessary to reduce the cost of product in competition, buyer
organizations turn to supply sources to develop these items. Several
trials and corrections may be required to finalize the substitute. In
house capacity is generally not available for this kind of trials. A
resourceful supplier is very useful in this process. Same logic holds
good in other exercises for cost reduction and value improvement.
It is quite logical that entire process is not outsourced but isolated
developmental activities are invariably done. It is common
A document by……………………………….ashish sawant